Chinese AI progress has been 'astounding' over past year, Barclays says

Investing.com -- Chinese artificial intelligence development has accelerated at a remarkable pace, with progress over the past year described as “nothing short of astounding,” according to Barclays analyst Jiong Shao.

In a note comparing AI trajectories in China and the United States, Barclays said China has closed much of the capability gap with Western models despite “significant deficiencies in AI compute.”

Shao wrote that China’s rapid progress has been enabled by “open source collaboration among the leading labs,” which allows local developers to build and iterate quickly on top of shared models.

While Barclays expects U.S. labs to “jump ahead in ’26 on the back of the GPT-6 equivalent models,” it emphasised that “China will remain close behind.”

Adoption still lags the West, with Chinese consumer and enterprise AI usage at roughly 200 million daily active users versus about 500 million in Western markets.

Shao attributed part of the gap to capacity constraints at domestic hyperscalers but said adoption should “mirror the mobile internet over the long term.”

Barclays highlighted China’s growing AI ecosystem, noting that “Chinese AI lab IPOs have begun.”

Apps such as Doubao and DeepSeek have amassed large domestic user bases, about 199 million and 249 million monthly active users, respectively, yet remain “negligible in the West.”

China’s competitive strength comes from low-cost, open-source models such as DeepSeek V3.2, which “costs ~$0.42/1M output tokens ≈3% of GPT-5.2,” according to Barclays. Capability gaps are narrowing, enabling widespread fine-tuning and accelerating innovation.

Still, structural differences favour U.S. returns, according to the bank.

“Estimated China AI capex is less than one-fifth of the top five U.S. hyperscalers,” Shao wrote, adding that user-mix and monetisation dynamics currently give U.S. platforms a sustained advantage.

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